Equipment Financing FAQ

Equipment financing is a loan or lease specifically designed to help businesses purchase equipment needed for operations. The equipment itself serves as collateral, making it easier to qualify than traditional business loans.

Most lenders offer equipment financing from $5,000 to $5 million or more. The exact amount depends on your creditworthiness, business financials, and the value of the equipment being financed.

Most lenders require a minimum credit score of 600-650. However, some specialized lenders work with scores as low as 500. Higher credit scores (700+) qualify for better rates and terms.

Equipment financing can be approved in as little as 24-48 hours with online lenders. Traditional banks may take 2-4 weeks. The speed depends on your documentation readiness and the lender's process.

Equipment loan rates typically range from 5% to 25% APR depending on credit score, time in business, equipment type, and loan term. Excellent credit and established businesses get the lowest rates.

Down payments typically range from 10% to 20%, though some lenders offer 100% financing for qualified borrowers. Larger down payments often result in better rates and terms.

Most types of business equipment qualify including construction equipment, medical devices, restaurant equipment, manufacturing machinery, vehicles, technology, and office equipment. The equipment must have business use.

Yes! Most lenders finance used equipment that is typically less than 10 years old and in good working condition. Used equipment may require larger down payments or have slightly higher rates.

An equipment lease is a rental agreement where you make monthly payments to use equipment without owning it. At lease end, you can return the equipment, purchase it, or lease new equipment.

Leasing is better for equipment that becomes obsolete quickly, preserves cash flow, and offers tax benefits. Buying is better for equipment you'll use long-term and want to fully own. Use our Lease vs Buy calculator to compare.

A Fair Market Value (FMV) lease has lower monthly payments but you don't own the equipment at the end. You can purchase it for its current market value, return it, or lease new equipment.

A $1 buyout lease (also called capital lease) has higher monthly payments but you own the equipment at the end for just $1. It's essentially a loan structured as a lease for accounting purposes.

Yes! Equipment lease payments are typically 100% tax-deductible as a business expense. This can provide significant tax advantages compared to purchasing.

A lease factor rate (or money factor) is how lease payments are calculated. Multiply the factor by the equipment cost to get the monthly payment. For example, 0.025 factor on $100,000 = $2,500/month.

Typical requirements include: business tax returns (2 years), bank statements (3-6 months), driver's license, business license, equipment quote or invoice, and sometimes personal financial statements.

Most lenders require 2+ years in business, though some specialized lenders work with businesses as new as 6 months. Startups may need larger down payments or personal guarantees.

Usually no. The equipment being financed serves as collateral. However, some lenders may require additional collateral or personal guarantees for larger loans or weaker credit profiles.

Initial pre-qualifications use soft credit pulls that don't affect your score. Full applications use hard inquiries which may lower your score by 5-10 points temporarily. Multiple inquiries within 30 days count as one.

Section 179 allows businesses to deduct the full purchase price of qualifying equipment in the year it's purchased, rather than depreciating it over time. The 2025 limit is $1,250,000.

Yes! You can claim Section 179 deduction on financed equipment. You don't need to pay it off first - the deduction applies when the equipment is purchased and placed in service.

Bonus depreciation allows you to deduct 50% (in 2024) of the remaining equipment cost after Section 179. It can be combined with Section 179 for maximum first-year tax deductions.

Yes! Interest paid on equipment loans is tax-deductible as a business expense. This reduces your overall cost of financing.

Equipment loan terms typically range from 1-7 years (12-84 months). The term usually aligns with the equipment's useful life. Longer terms mean lower payments but more total interest paid.

Most equipment loans have fixed interest rates, meaning your monthly payment stays the same. Some lenders offer variable rates that may start lower but can change over time.

Common fees include origination fees (1-5% of loan amount), documentation fees ($100-500), and sometimes early payoff penalties. Always ask for a full fee breakdown before signing.

Many lenders allow early payoff without penalty, though some charge prepayment fees. Check your loan agreement. Paying early saves interest but may have tax implications for Section 179 deductions.